Life & Health Insurance Exam (National Portion)Underwriting and Policy IssueEasy
An applicant for a life insurance policy completes the application but does not submit the initial premium with it. When will coverage most likely become effective?
- AWhen the policy is delivered to the applicant and the first premium is paid.
- BAfter the mandatory 10-day free-look period has expired.
- CImmediately upon completion of the application form.
- DUpon approval of the application by the insurer's underwriting department.
Show answer & explanationAnswer & explanation
Correct answer: A. When the policy is delivered to the applicant and the first premium is paid.
If the initial premium is not submitted with the application, coverage does not begin until the policy is delivered to the applicant, the first premium is collected, and the applicant is still insurable. This ensures the insurer receives payment before assuming risk.
Why the other options are wrong
- B. The free-look period begins after the policy is delivered, not before coverage begins.
- C. Coverage rarely begins immediately upon application completion without premium payment.
- D. Approval alone does not trigger coverage without premium payment and delivery.
Effective Date (No Premium)
When an initial premium is not paid with the application, coverage becomes effective upon policy delivery AND collection of the first premium.
- No premium, no immediate coverage.
- Requires delivery and first premium.
- Applicant must still be insurable at delivery.
Memory trick: No money upfront, no coverage 'til it's in your hand and paid for.